Compatibilization of blends of poly(ethylene terephthalate) (PET) and polystyrene with alternating copolymers of maleic anhydride and isobutylene (IM) and its partly phenol substituted product (PIM) has been studied. The characterization techniques applied were dynamic mechanical analysis, differential scanning calorimetry, scanning electron microscopy, and tensile testing. In all compositions studied, morphological observations demonstrated that the addition of approximately 5 wt % of copolymers led to the domain size reduction of dispersants. The PIM copolymer was most effective in reducing the domain size, whereas the IM copolymer was less satisfactory. The blends containing PIM also gave the more enhanced ultimate strength than those of other systems. The noncrystalline PIM copolymers lowered the tensile modulus of the blend as much as 60% even in the polystyrene-rich region and varied linearly with values of quenched PET modulus throughout the compositions, indicating the formation of homogeneous amorphous phase. Based on the experimental observation that the reduced domain size with PIM copolymer, a compatibilization mechanism of the blend with PIM alternating copolymer is proposed and discussed in terms of the interactions between ester groups of PET and PIM (transesterification), and the possible formation of intermediate pi-complex between the pi-electron deficient aromatic ring of PIM and pi-electron rich aromatic ring of PS.